Glad that I bought allot of OST a few weeks back. It has given a...

Glad that I bought allot of OST a few weeks back. It has given a nice warm and fuzzy feeling thank you!

I dont get this post about adding debt to market cap??

I actually have an accounting qualification (please dont tell anyone) and I have spent allot of time learning about this stuff over the last 25 years and that particular point is not one of them. It sounds like apples and oranges!

You do add debt to shareholders funds to get capital employed.

Either way OST is dirt cheap if you go down the traditional Ben Graham value investing formula with a fair margin of safety.

Morgan Stanley's Comments:
The company has come through a challenging period with its balance sheet intact. Importantly, it is now demonstrating upside potential from strategic initiatives in mining consumables and iron ore. Steep discount to base case DCF (55%) and growth potential support our Overweight recommendation. Underlying NPAT for the six months to December 2011 came in at A$78m: That was ahead of our estimate (A$69m) and guidance issued in November last year (A$55-75m), assisted by a lower effective tax rate of 13% for the period. A reported loss of A$74m mainly reflects write-downs relating to OST’s LiteSteel business. The balance sheet remains a point of focus: Net debt rose to A$2.24b as of December 2011 from A$1.7b in June. We expect this to rise further as development in South Australia continues, but for the company to remain within covenants. Improved earnings over the forecast period mean that OST’s balance sheet, while not without risks, should be sustainable. Expansion work on south Australian Iron Ore operations is proceeding within budget: The company expects first production from Peculiar Knob by year-end, with 2mt of output in FY2013. Whyalla port expansion creates the possibly of additional export volumes, potentially lifting sales to 11mt. OST did not provide quantitative guidance for the full year but we forecast improved earnings in H2: We upgrade our 2012 numbers by 8% to A$162m. Larger upgrades in FY2013 result mainly from increased contributions from the mining consumables division. Our price target moves up 4%, consistent with moves in underlying base case valuation.
Price Target 1.50